This paper seeks to broaden our understanding of the concept underlying absorptive capacity at
the macro –level, paying particular attention to the growth and development perspectives. We
provide definitions of absorptive and technological capacity, external technology flows,
productivity growth, employment creation and their interrelations. We then analyse the elements
of absorptive capability, focusing on the nature of the relationship within a systems view of an
economy, focusing primarily on the role of firm and non-firm actors and the institutions that
connect them, both within and across borders. We also undertake to explain how the nature of
absorptive capacity changes with stages of economic development, and the importance of the
different aspects of absorptive capability at different stages. The relationship is not a linear one:
the benefits that accrue from marginal increases in absorptive capability change over time.
Finally, we provide a tentative and preliminary conceptual argument of how the different stages
of absorptive capacity are related to productivity growth, economic growth and employment
creation.
Key words: New economy, absorptive capacity, knowledge